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Act iv i ty Report2008-2009

Impressum

The Swiss Finance Institute Activity Report is published once a year. A publication of the Swiss Finance Institute.

Editor: Jean-Pierre Danthine.Contributors to this issue: Anita Belitz-Krasniqi, Theresia Büsser Stalder, Rebecca Frank.

The Activity Report can be obtained free of charge from:

Swiss Finance InstituteBd. du Pont d‘Arve 401211 Geneva 4 - SwitzerlandTel +41(0)22 379 84 71 - Fax +41(0)22 379 82 77www.SwissFinanceInstitute.ch - research@sfi.ch

Activ i ty Report2008-2009

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s a world-leading financial center building on

a rich history, Switzerland’s financial sector has

the natural ambition of housing a world-leading

research and training center in banking and finance.

The Swiss Finance Institute is the product of this

ambition. Established at the initiative of the Swiss

Bankers Association, it is a private foundation created in

January 2006 with the support of the Swiss banking and

finance community and SWX together with the Swiss

Confederation, the Swiss National Science Foundation

and several Swiss universities with the aim of advancing

research activities in finance and executive education in

the banking and finance sector.

The Swiss Finance Institute encompasses three pre-existing

foundations: the International Center for Financial Asset

Management and Engineering (FAME), the Swiss

Banking School and the Stiftung Banking and Finance an

der Universität Zürich. This merger has led to the creation

of one of the major European providers of research,

doctoral training and advanced executive education in

banking and finance. This report gives an overview of

Swiss Finance Institute’s activities from July 2008

through June 2009.

A

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Table of content

Word from the Board 4

Swiss Finance Institute Faculty 5

Research Highlights 6

The Swiss Finance Institute Research Partner: NCCR FINRISK 9

The Swiss Finance Institute PhD Program in Finance 10

PhD Graduate Placements 12

Executive Education 13

Media Profile 18

Knowledge Transfer at the Swiss Finance Institute 19

Structure and Overseeing Bodies 20

Governing Bodies 21

2008 Facts & Figures 23

2008 and Forthcoming Publications in Academic Journals and Books by SFI Researchers 26

Swiss Finance Institute Research Paper Series 30

Overview of courses offered in 2008 by the Swiss Finance Institute 33

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Word from the Board

Olivier Steimer Chairman of the Foundation Board

Have we made it?

Three years after its founding the Swiss Finance Insti-tute has come a long way towards its initial objectives. We ambitioned to build up a first rate research center. By reaching the barrier of 21 publications in top journals (2008 or forthcoming, see p. 6) we indeed affirm our place among the leading research institu-tions in finance worldwide. We wanted to offer one of the choice PhD programs in finance. The placement of our PhD graduates – who are now active as assistant professors in Rochester, Pittsburgh, London, Montreal or Amsterdam - show that the quality of our students and of our training is now recognized the world over (see details on p. 12).

Of course these outstanding results need to be confir-med in the years to come and this will not come easily. It is also true that some of the researchers we were proud to see join our team have decided to pursue their career elsewhere. And we are confronted with the extraordinary difficulties the current financial cri-sis present to our Executive Education programs. But we are not in this for the short run! In these times of legitimate questioning over the source and the sustai-nability of value creation in financial activities our goal is to establish long lasting conditions for our scientific success. With the view of progressively asserting our capacity at steering the research agenda and renewing the premises of Executive teaching in finance.

This undertaking is only at its beginning, and it is too early to call victory, but our most recent results, exemplified in the current report, call for legitimate optimism.

This Activity Report is for us the occasion to express our admiration and our gratitude to Pierre Mirabaud and Patrick Odier. The Swiss Finance Insti-tute owes its existence to the visionary engagement of the departing president of the Swiss Bankers’ Associa-tion (SBA), Pierre Mirabaud. SFI and its predecessor, the International Center FAME, have been marked by the energy, commitment, enthusiasm and optimism of his successor at the helm of the SBA, Patrick Odier, who has left our Foundation Board at the end of the 2008-09 academic year covered by the present report.

We would also like to thank those members of our Foundation Board who have left during this period: Dr. Marcel Rohner of UBS, Dr. Ulrich Körner of Credit Suisse, and Prof. Dr. Hans Weder of the University of Zurich as representative of SFI-Zurich Center as well as a departing member of the Executive Education Advisory Board, Dr. Martin Moehrle from Deutsche Bank AG, on the Executive Education Advisory Board.

To all who have contributed or continue to contribute to our Institute we express our most sincere gratitude.

Jean-Pierre DanthineManaging Director

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Swiss Finance Institute Faculty (June 2009)

Philippe BacchettaGiovanni Barone-Adesi **Tony BerradaPeter Bossaerts *Marc ChesneyFulvio CorsiJean-Pierre DanthineEnrico De GiorgiFrançois Degeorge ***Pierre-André DumontPaul Embrechts *Rüdiger Fahlenbrach **** (July 2009)Giovanni FavaraFrancesco Franzoni ****Patrick Gagliardini ****Fausto GalliRajna Gibson Brandon **Manfred GilliAmit Goyal * Michel Habib* Thorsten Hens ***Martin HoesliJulien Hugonnier **** Jean ImbsEric JondeauFelix Kübler* Jean LefollHenri LoubergéSemyon MalamudLoriano ManciniErwan Morellec*Eric NowakKjell Nyborg* (August 2009)Claudio OrtelliMarc PaolellaMichael Rockinger ***Olivier Scaillet ***Karl Schmedders Norman Schürhoff **** Martin Schweizer **Didier SornettePascal St-AmourFabio Trojani ***Anders Trolle **** (August 2009)Paolo VaniniAlexander WagnerMei WangAlexei Zhdanov ****Alexandre Ziegler

* Senior Chair ** Distinguished Services Senior Chair*** Research Fellow**** Junior Chair

Swiss Finance Institute Faculty

Since its creation in 2006, Swiss Finance Institute has worked with its academic partners to hire 10 new professors at both the junior and senior level, bringing the total of SFI faculty to 50 in June 2009.

One of the Swiss Finance Institute’s ambitions is to reach top rank among the finance research institutes in Europe. With a faculty of 50 professors, Swiss Finance Institute is well on its way to reaching this goal after only a few short years of activity. Almost one half of our faculty hold SFI chairs or fellowships, attesting to the outstanding research work that our faculty members produce on a regular basis. Together with the rest of the SFI Faculty members they form what is one of the largest and most productive research groups in finance in Europe. Our faculty body represents an extraordinary, varied concentration of competencies. This expertise is transferred to individuals through an innovative and rigorous PhD curriculum, executive education as well as being pre-sented on a regular basis to industry experts through our knowledge transfer series. It is also the case that the large majority of our faculty intervene in the bachelor and master programs offered by the Swiss Finance Institute partner university institutes.

2008 was a year of changes for SFI. Several faculty members left our partner universities following what can be considered a normal flux in the academic community and retirements. At the same time, however, SFI and its partners went through an extremely ambitious recruiting campaign which has led to the hiring of five new professors for the 2009/2010 academic year.

As of June 2009, the core SFI faculty boasts six professors holding senior chairs, five fellows and five junior chairs. The overall SFI research team includes thirty-four additional professors with permanent or temporary University contracts, all active in research under the name of, and eligible for support from, the Swiss Finance Institute.

Center Highlights

The SFI Regional Centers counted a number of successful events during 2008 and the beginning of 2009. At the SFI Léman Center Amit Goyal was hired as an SFI Senior Chair at the University of Lausanne and this fall EPFL will welcome 6 new professors in the area of finance.

At the SFI Lugano Center, Fabio Trojani was hired and received an SFI Fellowship.

At the SFI Zurich Center, Felix Kübler joined as an SFI Senior Chair in 2008 and has assumed the role of the Zurich Center Head, representing the University of Zurich and ETHZ in the SFI College of Center Heads.

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Research Highlights

The Scientific Council of Swiss Finance Institute places extra weight on publications appearing in the following journals: Journal of Finance, Journal of Fi-nancial Economics, Review of Financial Studies, Ame-rican Economic Review, Journal of Political Economy, Quarterly Journal of Economics, Econometrica, and Review of Economic Studies. In 2008 and through the summer of 2009 the following twenty-one (!) articles were accepted for publication:

2008A GARCH Option Pricing Model with Filtered Histo-rical Simulation, G. Barone-Adesi, R. F. Engle and L. Mancini, the Review of Financial Studies, vol. 21(3), pp 1223-1258, 2008.

Flight-to-Quality or Flight-to-Liquidity? Evidence from the Euro-Area Bond Market, A. Beber, M. W. Brandt, and K. Kavajecz, the Review of Financial Studies, vol. 22(3), pp 925-957, 2009.

Equilibrium Portfolio Strategies in the Presence of Sentiment Risk and Excess Volatility, B. Dumas, A. K. Urshev, R. Uppal, the Journal of Finance, vol. 64(2), pp 579-629, 2009.

Underinvestment vs. Overinvestment: Evidence from Price Reactions to Pension Contributions, F. Franzoni, the Journal of Financial Economics, vol. 92(3), pp 491-518, 2009.

Ambiguity Aversion and the Term Structure of Interest Rates, P. Gagliardini, P. Porchia and F. Trojani, the Review of Financial Studies, vol. 22(10), pp 4157-4188, 2008.

How Common are Common Return Factors Across Nyse and Nasdaq?, A. Goyal, C. Pérignon and C. Villa, the Journal of Financial Economics, vol. 90(3), pp 252-271, 2008.

The Selection and Termination of Investment Managers by Plan Sponsors, A. Goyal and S. Wahal, the Journal of Finance, vol. 63(4), pp 1805-1847, 2008.

A Comprehensive Look at the Empirical Perfor-mance of Equity Premium Prediction, A. Goyal and I. Welch, the Review of Financial Studies, vol. 21(4), pp 1455-1508, 2008.

Stock returns in mergers and acquisitions, D. Hackbarth and E. Morellec, the Journal of Finance, vol. 63, pp 1203-1242, 2008.

Learning and Asset Prices Under Ambiguous Infor-mation, M. Leippold, F. Trojani and P. Vanini, the Review of Financial Studies, vol. 21(6), pp 2565-2597, 2008.

Financing and takeovers, E. Morellec and A. Zhdanov, the Journal of Financial Economics, vol. 87, pp 556-581, 2008.

Level Playing Fields in International Financial Regulation, A. Morrison and L. White, the Journal of Finance, forthcoming.

2009 or forthcoming:False discoveries in mutual fund performance: Mea-suring luck in estimated alphas, L. Barras, O. Scaillet and R. Wermers, the Journal of Finance, forthcoming.

Equilibrium Asset Pricing Under Heterogeneous Information, B. Biais, P. L. Bossaerts and C. Spatt, the Review of Financial Studies, in press.

Auctioned IPOs: The U.S. Evidence, F. Degeorge, F. Derrien and K. Womack, the Journal of Financial Economics, forthcoming.

The visibility of the Swiss Finance Institute in the international academic world is steadily gaining ground in particular through the increasing number of top quality publications by Swiss Finance Institute researchers in internationally recognized top academic journals, i.e., those journals that historically have been first in promoting the ideas that have changed financial practices.

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Information Percolation with Equilibrium Search Dynamics, D. Duffie, S. Malamud and G. Manso, Econometrica, forthcoming.

Finance, Institutions and Risk Sharing in Internatio-nal Portfolios, M. Fratzscher and J. Imbs, the Journal of Financial Economics, forthcoming.

Asymmetric Information and Adverse Selection in Mauritian Slave Auctions, D. Georges, P. St-Amour and D. Vencatachellum, the Review of Economic Studies, forthcoming.

Cross-Section of Option Returns and Volatility, A. Goyal and A. Saretto, the Journal of Financial Economics, forthcoming.

Pricing American options under stochastic volatility and stochastic interest rates, A. Medvedev and O. Scaillet, the Journal of Financial Economics, forthcoming.

Dynamic Investment and Financing under Personal Taxation, E. Morellec and N. Schürhoff, the Review of Financial Studies, forthcoming.

Names appearing in bold indicate SFI Faculty members at the time of acceptance or publication of an article in the journal.

In addition 49 research papers were placed into the SSRN – Swiss Finance Institute series in 2008.

This series was launched in 2006 as a collaborative project between SFI and NCCR FINRISK with both partners sharing costs equally. This series is publis-hed on the SSRN website www.ssrn.com/link/swiss-finance-institute.html. A complete list of these papers is available on pages 30-32 of this report.

“No country can move forward without ongoing research and innovation. The Swiss Financial Center can be proud to be able to benefit from the knowledge, research and challenges developed by the Swiss Financial Institute.”

Pierre G. Mirabaud , former President of the Swiss Bankers Association

Outstanding Paper AwardThe winners of the 2008 Outstanding Paper Award were Darrell Duffie (Stanford University), Andreas Eckner (Merrill Lynch), Guillaume Horel (Stanford University) and Leandro Saita (Lehman Brothers) for their paper entitled “Frailty Correlated Default”. This paper is forthcoming in the October 2009 issue of the Journal of Finance and was the object of a public lecture “Policy Issues Facing the Market for Credit Derivatives” by Darrell Duffie in Geneva on June 9, 2009.

The Swiss Finance Institute’s Outstanding Paper Award is awarded annually to an unpublished re-search paper circulated over the previous 12 months and making an outstanding contribution to the field of finance. The jury selecting the winning paper is composed of all Swiss Finance Institute chaired professors and Fellows and is headed by SFI Senior Chair Prof. Michel Habib.

False discoveries in mutual fund performance: Measuring luck in estimated alphas

This paper is an example of how research works flow over into industry practice. The paper was the recipient of the Banque Privée Espirito Santo Award - SFI Prize 2008. It has been high-lighted in general or trade publications such as the New York Times, Forbes Investment Guide, l’Hebdo, Le Temps, L’Agefi and La Libre Entre-prise and is now forthcoming in the Journal of Finance. It should be noted that Olivier Scaillet’s co-authors are also linked to SFI: Laurent Barras is an SFI PhD graduate who is currently Assistant Professor of Finance, Desautels Faculty of Ma-nagement, McGill University. Prof. Russ Wer-mers of Duke University has been a contributor to our executive education series.

“This paper develops a simple technique that controls for “false discoveries,” or mutual funds that exhibit si-gnificant alphas by luck alone. Our approach precisely separates funds into (1) unskilled, (2) zero-alpha, and (3) skilled funds, even with dependencies in cross-fund estimated alphas. We find that 75% of funds exhibit a zero alpha (net of expenses), consistent with the Berk and Green (2004) equilibrium. Further, we find a significant proportion of skilled (positive alpha) funds prior to 1996, but almost none by 2006. We also show that controlling for false discoveries substanti-ally improves the ability to find funds with persistent performance.”

Olivier Scaillet

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The Swiss Finance Institute Research Partner: NCCR FINRISK

Based on the FINRISK / SFI cooperation agreement, active collaboration between both entities has been further consolidated during 2008/09. Major develop-ments and joint activities by FINRISK and SFI during the reporting period are presented below.

By the end of 2008, the Swiss National Science Foun-dation (SNSF) research council approved the FINRISK proposal for its final third phase 2009-13. The SNSF budget for FINRISK will be significantly cut (by 40% over 4 years). However, the Confederation plans to provide additional (long term) research funding as of 2012 (to be transferred directly towards SFI!). Thus, the last year has been a transition phase during which the FINRISK members have on the one side worked on preparing FINRISK smoothly for its third phase, trying to minimize the impacts of the significant SNSF budget reduction on our future research capacity while on the other side continuing to support the finance faculty growth plan that underpins the SFI faculty hiring strategy.

In June 2009 Michel Habib took over the directorship of the NCCR from Rajna Gibson Brandon while Prof. Gibson Brandon was elected as NCCR FINRISK deputy director. This change has received the full support of all parties involved, including the SNSF, the University of Zurich as the NCCR FINRISK leading house and the individual project directors whom this person shall represent.

SFI Funded FINRISK Research Project The FINRISK research project on “Equilibrium Asset Pricing”, headed by Prof. Bernard Dumas (UNIL and SFI), has been fully financed by SFI since 2007. It currently integrates 10 professors as well as 5 PhD students from various institutions (June 2009). The scientific output has been 7 working papers as well as two publications (Journal of Finance and Economic Theory). One of the PhD students int his project has re-cently graduated and has obtained a faculty position at Carnegie-Mellon University, Tepper School of Business. Two PhD students have been visiting scholars abroad (MIT, University of California at Los Angeles) under the FINRISK sponsorship. An international workshop on “Computational Financial Economics” organized by research group members Kubler and Schmedders and sponsored by this project will take place at the Universi-ty of Zurich during September 2009.

The general theme of the project is the impact of “im-perfections” on the prices prevailing in the financial mar-

kets and on the equilibrium values of the choices made by financial agents. The ultimate goal is to determine empirically which combination of “imperfections” best explains observed financial market prices. In this way, observed prices provide information about the under-lying behavior pattern of financial market participants (households and firms). Some of the imperfections may also limit the ability of the financial economists to draw inferences about the meaning of financial market prices, and the ability of traders to make decisions.

This research project will unfortunately be dissolved over the next 12 months due to the departure of the project leader Prof. Bernard Dumas.

SFI / FINRISK Annual Workshop in FinanceEach year since 2002, more than 20 doctoral students from the FINRISK network institutions present their current research in progress at a doctoral workshop organized by SFI and FINRISK and sponsored by the Study Center Gerzensee Foundation. The 8th Swiss Doctoral Workshop in Finance was organized on June 8-9, 2009 with the participation of more than 40 PhD students. Each of the 23 presented papers was dis-cussed by another doctoral student before René Stulz (Ohio), Jerome Detemple (Boston) as well as FINRISK faculty provided their feedback. Doctoral awards reco-gnizing outstanding research papers and discussions led by students are given out each year following the workshop. (For more information please see page 11 of this report.) On the second day of the workshop, a meeting to further coordinate the doctoral program in finance across SFI Centers also took place.

The FINRISK Research Day 2009, which was again organized in parallel with the SFI-FINRISK doctoral workshop, was a success story that attracted about 100 participants from the FINRISK network. The goal of this Research Day is to allow scientists with common interests from various projects to interact and discuss their research work and get to know each other better, with a potential to generate scientific collaborations through the contacts established during the work-shop. The FINRISK / SFI faculty presented ongoing research projects in their respective field of “Risk Management”, ”Asset Pricing and Portfolio Manage-ment”, “Corporate Finance” and “Quantitative Me-thods in Finance”. In addition, Amit Goyal (SFI Senior Chair at the University of Lausanne) held a keynote lecture on pension funds.

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The Swiss Finance Institute PhD Program in Finance

The Swiss Finance Institute PhD Program in Finance is targeted towards the pursuit of academic excellence. It aims at providing an intellectual environment and a curriculum comparable with the top PhD programs in Europe and North America. SFI seeks to thoroughly prepare our students for a successful academic career and to place them at renowned finance departments world-wide, a goal which thoroughly came to fruition this year!

As of June 2009, there were 71 PhD students enrolled in the SFI PhD program in finance with a balanced geographical dispersion (Léman Center: 24, Lugano Center: 23, Zurich Center: 24). A total of 34 new PhD students will join the program as of September 2009 (Léman 16 students, Lugano 6 students, Zurich 12 students). The SFI provides (on average) 22 scholar-ships for first year PhD students from the program and supports several advanced doctoral courses. The local universities finance most of the PhD positions for advanced students (year 2-4). FINRISK continues to coordinate and to partially finance the doctoral program activities, including the 13 advanced PhD courses offered during 2008/09. Furthermore, all participants at the various PhD courses and workshop receive reimbursement of their travel and accommo-dation expenses from FINRISK.

EPFL joins the SFI PhD programIn the course of 2008, SFI approved the joining of EPFL (Ecole Polytechnique Fédérale de Lausanne) as a full-fledged partner in the SFI PhD program. EPFL offers a PhD program in finance under the leadership of Professor Erwan Morellec. With EPFL joining the program, PhD students will have access to EPFL’s finance faculty for courses and thesis supervision. The implications of this partnership should also lead to an extra three to five students to be admitted every year in the Léman Center. This will have the long-run implication of a total targeted student body of nearly 100 students!

SFI / FINRISK Doctoral CoursesA total of 13 doctoral courses in finance were jointly organized by FINRISK and SFI in 2008/09. According to the FINRISK / SFI cooperation agreement, these courses are offered to doctoral students from any Swiss University.

• Recent Developments in Macro Term Structure and Credit Risk Modeling, Pietro Veronesi (Chicago),

• Dynamic Asset Pricing, Suleyman Basak (London)• Behavioural Portfolio Theory, Enrico De Giorgi

(Lugano)• A Continuous Time Approach to Dynamic Incentive

Problems, Yuliy Sannikov (Princeton)• Advanced Term Structure Modeling, Markus Leippold (London)• Portfolio Optimization by Simulation Methods,

Jerôme Detemple (Boston)• Dynamic Corporate Finance, Erwan Morellec

(EPFL)• Econometrics of Asset Pricing, Alain Montfort

(CREST, Paris)• Advanced Empirical Corporate Finance, Alexander

Ljungqvist (NYU)• Econometrics of Continuous-Time Finance, Yacine Ait-Sahalia (Princeton)• Dynamic Portfolio Choice, Marcel Rindisbacher

(Boston University)• Modeling Financial Markets in Which Agents In-

teract by Search for Counterparties, Darrell Duffie (Stanford)

• Corporate Finance, Jay Ritter (University of Florida)

PhD Awards & Support:Swiss Finance Institute Best Paper Doctoral AwardThe annual SFI Best Paper Doctoral Award was started in 2003 by the International Center FAME and from 2006 has been extended to all Swiss Doctoral Students in Finance under the auspices of FINRISK and SFI. It awards a PhD student for an outstanding research pa-per presented at the Annual PhD Workshop organized by FINRISK and SFI. The winning paper is nominated by a committee formed of outside experts partici-pating in the Workshop and is selected by faculty representatives from each SFI Academic Center. The Award is bestowed upon the winner at the SFI Annual Meeting and the recipient receives CHF 2’000 and a certificate for her/his accomplishment. In 2008, the Award was given to Laurent Frésard from the Univer-sity of Neuchatel at the SFI Annual Meeting for his paper “Financial Strength and Product Market Behavi-ors: The Real Effects of Corporate Cash Holdings”.

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Swiss Finance Institute Best Discussant Doctoral AwardThe annual SFI Best Discussant Doctoral Award was begun by SFI in 2007 and is awarded to PhD students for an outstanding discussion of a paper presented at the Annual PhD Workshop organized by FINRISK and SFI. The recipients are selected by the chairmen of the respective workshop sessions. The Awards are besto-wed upon the winners at the SFI Annual Meeting and the recipients receive CHF 1’000 (to be shared among the winners) and a certificate for her/his accomplish-ment. In 2008 the recipients were Jan-Peter Kulak and Rodolfo Prieto, SFI Léman, and Leon Bogdan Staces-cu, SFI Zurich/FINRISK Graduate 2008, who received their awards at the SFI Annual Meeting.

Advanced Doctoral Grants and PhD Study AbroadSwiss Finance Institute PhD students with academic ambitions are strongly encouraged to spend an exten-ded visit abroad in a top department under the pre-arranged supervision of a researcher interested in the PhD student’s research. To that effect, on the recom-mendation of the Scientific Council, SFI instituted a program of advanced doctoral grants coordinated with the financial support often available from the SNSF and guaranteeing financial support for up to CHF 40‘000 per candidate. PhD students who have studied abroad during 2008 and the first half of 2009 are:

•Nicola Fusari from the University of Lugano was awarded an SNSF grant to spend a year at the Kel-logg School of Management.

• Boris Nikolov from the University of Lausanne visited Wharton.

• Florian Peters from the University of Zurich is spen-ding a second year at UC Berkeley as a post doctoral fellow (faculty sponsor: Ulrike Malmendier).

• Rodolfo Prieto from the University of Lausanne visited MIT’s Sloan School of Management (faculty sponsor: Leonid Kogan).

• Alexandre Jeanneret from the University of Lausan-ne visited the Anderson School of Management at UCLA.

• Philip Valta from the University of Lausanne visited Duke University (faculty sponsor: Richmond Mathews).

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PhD Graduate Placements

The Swiss Finance Institute PhD Program counts a growing number of outstanding graduate placements. Coming from either its foundation programs (FAME and FINRISK) or the Swiss Finance Institute program itself, our graduates are increasingly successful at securing notable positions at prestigious academic and financial institutions.

Following what was probably the most successful placement campaign ever for a European institution, the Swiss Finance Institute PhD graduates have, over the period under review, obtained assistant profes-sor positions at leading institutions such as Carnegie Mellon and Rochester universities in the USA, McGill university in Montreal as well as the London School of Economics and the University of Amsterdam. The Swiss Finance Institute’s presence on the doctoral scene was made clear when SFI candidates were solici-ted for nearly 100 job interviews at the ASSA meeting in January 2009.

Following are the resulting placements:

Laurent Barras, a 2007 SFI PhD graduate of the University of Geneva, will start in September 2009 at McGill University. Laurent’s thesis addresses a long-standing and fundamental issue in the mutual fund industry: how many funds in the population are truly able to deliver superior performance?

Maria Cecilia Bustamante, a SFI PhD student at the University of Lausanne, will start in August 2009 at the London School of Economics. Maria Cecilia elaborated on how real and financing frictions affect corporate decision making under uncertainty.

Jens Martin, a SFI PhD student at the University of Lugano, will start in August 2009 at the University of Amsterdam. Jens has studied conflicts of interest among financial analysts in financial markets.

Boris Nikolov, a SFI PhD graduate from the University of Lausanne, will start in July 2009 at the University of Rochester. Boris’s research investigates the effects of real market frictions and agency costs on firms’ finan-cing, cash holdings, and investment policy.

Emilio Osambela, a SFI PhD graduate of the Univer-sity of Lausanne, will start in July 2009 at the Tepper School of Business, Carnegie-Mellon University. In his dissertation, Emilio uncovers the frictions that generate the observed dynamics of stock market vola-tility in the time-series, and the existence of multiple volatility factors, which are priced in the cross-section of expected stock returns.

SFI PhD GraduatesThe following students graduated from the SFI PhD Program during 2008 and 2009:

2008Fabien CoudercHead of Pricing Group, R&D, RiskMetrics Group

Alexey MedvedevQuant, Lombard Odier Darier Hentsch & Cie

Sébastien MichenaudAssistant Professor of Management, Jesse H. Jones Graduate School of Management, Rice University

Boris NikolovAssistant Professor, University of Rochester

Augusto PerillaQuantitative Analyst, RMF Investment Management

Ganna ReshetarFinancial Servicies Advisor, Deloitte

Bogdan StacescuAssociate Professor, BI Norwegian School of Management

2009Gorazd BrumenMorgan Stanley Risk Management Group, London

Maria Cecilia BustamanteAssistant Professor of Finance, London School of Economics

Philip FasnachtRisk Manager, Credit Suisse

Jens MartinAssistant Professor, University of Amsterdam

Emilio OsambelaAssistant Professor, Tepper School of Business, Carnegie-Mellon University

Luca TaschiniResearch Associate, London School of Economics

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Executive Education

Overview 2008In its third year of operation, Executive Education at the Swiss Finance Institute continued its success by offering 32 courses to 560 participants from all over the world. 60% of participants of our international courses came from outside Switzerland, representing 46 different nationalities and demonstrating the inter-national recognition of our programs.

Executive Education is where the intellectual capital of the Swiss Finance Institute can have the most immedi-ate impact on the finance industry. However, research results need to be conveyed in a palatable and practi-cal form. And this is where SFI Executive Education wants to excel on an international level!

The fact that the Swiss Finance Institute can look back on 26 years of experience in executive education in finance and 21 years of executive education in bank management, through its predecessor organizations, gives it a sound basis to build on. To achieve this goal the Swiss Finance Institute has developed a clear and focused, but also very ambitious, strategy for its Execu-tive Education offering:

• Itconcentratesexclusivelyonadvancedgraduate-level finance courses on the one hand, and on bank management courses for executives on the other.

• Intheseareas,theSwissFinanceInstituteoffersopen-enrolment programs on a graduate level, as well as Diploma and Master Programs with highly selective admittance.

• Withafewexceptions,allprogramswillbeaimedataglobal audience, thus fostering the exchange of ideas at the foremost frontiers of knowledge and experience.

One cornerstone of this plan is the internationaliza-tion of one of the Institute’s German bank manage-ment programs: On July 7, 2008, the Senior Manage-ment Program in Banking, the international version of the Advanced Executive Program, was successfully launched with a full enrolment of 25 participants from all over Europe. Taught in the style of a mini Executi-ve MBA, this modular program sees participants spend one week in Geneva, in London, in Madrid and in Warsaw for an update on strategic developments in the banking industry. For more than 20 years the SFI has combined academically researched concepts with industry specific practitioner input, and assembled industry peers at management level. Until now this approach has been offered in Switzerland only. With the Senior Management Program, we have raised this approach to an exciting new level across Europe!

In 2008, the Swiss Finance Institute expanded its offer in finance to 21 one-week courses, in addition to the traditional 4+1-week immersion Certificate Program in Financial Asset Management and Engineering (FAME).

Two open-enrolment courses for executives were held in bank management, plus the 5-week SFI Advanced Executive Program, the 4-week Senior Management Program in banking and the 7-week, two-year SFI Executive Program. Additionally, the SFI contributed to the Masters in Wealth Management offered by the Singapore Management University together with the Wealth Management Institute of Singapore. Fur-thermore, four in-house courses have been offered throughout the year. On an international graduate level in banking and finance, this is one of the broadest offerings in the world!

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Key figures for the Swiss Finance Institute executive education in 2008

• In2008theSFIoffered32coursesforatotalof48weeks> 22 courses in advanced finance for a total of 26 weeks> 5 courses in bank management for a total of 18 weeks> 5 in-house training courses for a total of 4 weeks

•560participantstookoneormoreoftheInstitute’scourses;168 graduated from one of its diploma courses.

• IntheSFIinternationalprogramsmorethan60%ofparticipants came from outside Switzerland, representing 46 different nationalities.

The Executive Education offering: FinanceThe Geneva Executive Courses in FinanceThe Geneva Executive Courses in Finance are a suite of independent courses. Each course addresses a selected finance topic, where it offers a superb over-view of the current status and modern developments relevant to practitioners. The GECF courses are atten-ded by participants from a broad spectrum of private financial institutions, central banks and international financial organizations. The courses have a history of more than 25 years and over the years participants from more than 1300 institutions and 98 countries have atten-ded the courses.

The Swiss Finance Institute is registered with the CFA In-stitute as an Approved Provider of continuing education programs. The CFA Institute awards CE credits for the attendance of a Geneva Executive Course in Finance.

In 2008 courses were offered in the following three areas:• Riskmanagement,derivativesandtrading• Assetmanagement• FinancialmodelingandquantitativemethodsNew subjects ranged from energy and emission trading to essentials of options, futures and other derivatives.

The main feature of the Swiss Finance Institute courses lies in the fact that our professors have unique insight into the functioning of financial markets through their research and their consulting activities. This enables them to see both the theoretical and practical aspects, which, given their pedagogical skills, they are able to convey effectively to course partici-pants. Selected practitioners join in to demonstrate how they use the financial modeling, risk and asset management tools in their day-to-day life.

In 2008 Didier Cossin, UBS Professor of Banking and Finance at IMD, celebrated his 10-year anniversary as GECF professor. Our sincere thanks go to him for his long and outstanding contribution to the Institute’s Executive Education.

Financial Asset Management and Engineering Program (FAME)In its 13th year, FAME is an intensive 4+1-week pro-gram designed to provide applied training in state-of-the-art techniques and practices used in asset manage-ment and financial engineering. Taught in Lausanne in a technology laboratory, FAME is preceded by an optional one-week course which covers the founda-tions of finance. Each module is taught by a leading academic supported by practitioners. 27 participants joined this program in 2008 representing 11 countries from around the globe. .Until the summer of 2008 and for the last ten years, the FAME program had been guided by the exceptional expertise and dedica-tion of Prof. Salih Neftci. It is a great loss for the Swiss Finance Institute that Prof. Neftci who had been a close and enthusiastic contributor to our activities as well as those of the International Center FAME passed away in April 2009.

Salih NeftciThe Swiss Finance Institute, its professors, employees, students and graduates were very sad to learn of the passing of our friend and colleague Prof. Salih Neftci on April 15, 2009.

Prof. Neftci was an active member of Swiss Finance Institute and its predecessor, the International Center FAME, from 1996 until 2009, contributing enthusiasm and expertise to a number of our activities, teaching in the doctoral program, the Executive Courses in Finance and successfully leading the Certificate FAME pro-gram. His passing is a great loss for our Institute and we will miss him immensely. Prof. Salih Neftci 1947 - 2009

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The international nature of the Geneva Executive Courses in Finance and the FAME program can be seen in the graph below:

The Executive Education offering: Bank ManagementIn bank management, the focus of the Swiss Finance Institute is to provide insight on key trends in the financial industry, both on a strategic and on an ope-rational level. The concepts underlying these trends are presented by academics selected for their exten-sive industry involvement, and their understanding of the implications of these concepts for the finance industry. Senior executives are invited to present their institution’s reaction to these developments.A systematic and regular update of the topics and course structure ensures that the needs of the market are constantly met. Finally, the carefully selected par-ticipants are of the highest calibre, ensuring a critical discussion of the ideas presented among peers.

Seminars in Bank ManagementIn 2008 the Swiss Finance Institute organized two international seminars with 51 participants. The most prestigious of these seminars is the five-day Internati-onal Private Banking Retreat for Managing Directors. The Retreat assembles academic opinion leaders and senior private banking executives to discuss research and practical advances in the increasingly complex and globalized wealth management sector. Attendees are drawn from all over the world including North America, Europe, the Middle East and Asia.2008 marked the 10th anniversary of the Retreat and its focus was on the most efficient means to craft and deliver risk-aware advice to wealth owners in a global context.

SFI Executive Program and SFI Advanced Executive Program in Bank ManagementThese two German-speaking part-time bank ma-nagement programs brought together a total of 190 participants in 2008. The aim of these programs is to develop a broadened understanding of the finance industry, and thereby achieve an improved quality of decision-making as well as a superior ability to interact with colleagues from other business areas.

The SFI Executive Program runs for 7 weeks which are spread over a two year period. It is aimed at young Vice Presidents; the SFI Advanced Executive Program consists of 25 days spread over one year, and is aimed at Senior Vice Presidents and Executive Directors. Both programs are comparable in style to a shorte-ned MBA program, with extensive use of cases, class discussions, and group presentations to incorporate the experience of the widely diverse participants. Both programs utilize about a dozen professors selected from Swiss and foreign universities, each of them re-sponsible for leading one specific subject. Up to eighty senior executives join for special presentations and in-depth discussions.

Senior Management Program in BankingIn 2008 the Swiss Finance Institute launched the Senior Management Program in Banking with a full enrolment of 25 participants from all over Europe. The program brings together a dynamic internatio-nal faculty, industry leaders and peers to present and discuss strategic developments in the finance industry. The program is split into four blocks lasting 4 to 6 days, with each block taking place at a different Euro-pean financial center. The course is held in English.

Participant's origin in the Finance courses 2008

Asia and Australia 6%Americas 5%

Africa andMiddle East 5%

Europe 44%

Europe 44%

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Master ProgramThe Swiss Finance Institute is also responsible for the two-week Swiss module of the Master in Wealth Management offered by the Singapore Management University, with the Wealth Management Institute as third partner. The Swiss module was held for the 4th time in 2008, with 52 participants from Singapore and South East Asia.

Participants in Executive Education courses in 2008

Finance Geneva Executive Courses in Finance 125FAME Certificate 27

Bank Management Banking seminars 51SFI Bank Management programs 215Masters programs 52In-house programs 90

Total 560

Outlook 2009In the Executive Program 2009/2010, 55 participants have successfully completed the Fundamentals of Finance course. This is a one-week course which is a prerequisite for the admittance to the core part of the Executive Program.

The Advanced Executive Program 2009 started in February with the first of its ten 2.5 day modules with 35 participants. The program will last until December 2009.

Finally, the second cycle of the Senior Management Program successfully started with 16 participants. The initial module in Geneva will be followed by another three modules to be held in London, Madrid, and Bratislava.

The FAME program was successfully completed with 13 participants from 7 different countries.

The financial crisis has severely impacted participation in Executive Education courses globally. The Swiss Finance Institute has not been able to escape this trend. We are noticing a decreasing number of participants since the middle of 2008.

For a complete list of the Executive Education courses offered by the Swiss Finance Institute in 2008 see pages 33-35.

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Media Profile

Alumni AssociationThe Swiss Finance Institute Alumni Association (SFIAA) took over from the former Swiss Banking School Alumni Association on April 28, 2006. Graduates from the Exe-cutive Program, Advanced Executive Program, Interna-tional Wealth Management Executive MBA, Financial Asset Management and Engineering Program and the Senior Management Program in Banking are eligible to join. There are now over 1200 members of the SFIAA.

The Swiss Finance Institute Alumni Association promotes• networking among its members• further education of its members by means of semi-

nars and lectures (in collaboration with the Swiss Finance Institute)

• contributing to the ongoing improvement of the Swiss Finance Institute

In addition to an annual meeting of members, the Swiss Finance Institute Alumni Association and the Swiss Finance Institute jointly organize the Alumni Luncheons with prominent guest speakers as well as the SFIAA Golf Trophy in August.

2008 Alumni LuncheonsJanuary 24, 2008Kaspar MüllerPresident of the Ethos Foundation and Ethos Services Corporate Governance

April 9, 2008Pierre MirabaudPresident of the Swiss Bankers Association

July 9, 2008Adolf E. RealPresident of the Liechtenstein Banking Association

September 25, 2008Prof. Ilker BaybarsDeputy Dean of the Tepper School of Business, Carnegie-Mellon University Pittsburg, USA

November 10, 2008Dr. Urs RüegseggerGroup CEO, SFMS Management AG, SWISS FINAN-CIAL MARKET SERVICES

In order to promote the networking among women in the SFIAA, in 2008 the first Women-Luncheon has been launched successfully with 48 registered women:

November 13, 2008Antoinette Hunziker-EbneterCEO Form Futura Invest AG

During 2008, the Swiss Finance Institute intensified its efforts to develop and enhance its media profile. Efforts focused on strengthening contacts with journalists, the publication of press releases and newsletters, and the establishment of methods to assess the media profile of the Swiss Finance Institute in print, radio and on the Internet.

The number of media references to the Institute‘s acti-vities during 2008 was almost identical to that enjoyed during the two previous years. In total, there were 125 print and radio references to the Institute in 2008, com-pared to 117 in 2007.

In 2008 a total of 13 press releases were distributed on topics as diverse as:Launch of the Emissions Trading course, Sponsoring of the new Swiss Finance Institute Research Prize by Banque Privée Espirito Santo, New SFI Chairs, Launch of the Senior Management Program in Banking, 10th Anniversary of the International Private and Wealth Ma-nagement Retreat, Research Award Prize Winners and the Announcement of the Annual Meeting.

The Swiss Finance Institute newsletter is published twice a year. The January 2008 edition contained recognitions for research activities, the 20th anniversary of the Exe-cutive Program and the 2007 Annual Meeting, where McGill University researchers Susan Christoffersen and Sergei Sarkissian received the SFI 2007 Outstanding Paper Award.

A second edition of the newsletter was produced in July 2008 with a focus on new academic faculty, the launch of the Senior Management Program in Banking and our long-standing co-operation with the Singapore Manage-ment University. Furthermore, there was a résumé of the Gerzensee 2008 research meeting, which assembled doc-toral students and faculty to discuss the latest research findings in finance.

In January 2009 Newsletter No. 5 was distributed with information about the planned EMBA launch and the highlights of the third Annual Meeting, where more than 200 distinguished academics and finance practitio-ners participated at the Credit Suisse Forum in Geneva.

The mailing list for the Institute’s newsletter includes researchers affiliated with the Swiss Finance Institute and former participants of the Institute‘s Executive Education programs. The list is expanded continuously, which reflects a broader goal to enhance our media pro-file with the active involvement of the Institute‘s closest affiliates and alumni.

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Knowledge Transfer at the Swiss Finance Institute

Knowledge Transfer at SFI provides platforms at the cutting edge of research and business and organizes events to encourage dialogue between research and the banking industry thus providing applied knowledge.

3rd Annual Meeting of the SFI in Geneva at Credit Suisse Forum on November 18Over 250 participants attended this research and know-ledge transfer event, assembling leading academics and finance practitioners. The event was organized with the research partner FINRISK and the support of the Gene-va Financial Center Foundation.

One of the highlights of the 3rd Annual Meeting was the lively debate at the round table on “Finance in the Wake of the Subprime Crisis”. Among the many que-stions raised, Swiss Bankers Association former Chair-man Pierre Mirabaud asked why banks were prepared to bear such exaggerated risks when their very functioning depends on their reputation to protect investors from harm. The Institute’s Director of Research Professor Rajna Gibson asked what the impact of the financial crisis on the practice of quantitative risk management in tomorrow’s banking industry will be. And Chester Spatt asked why so few within industry managed to step back and ask themselves how banks could have increased their profits so dramatically in recent years. Panelists and presenters provided responses and approaches to all these questions during the one-day program.

What lessons can be learned from the financial crisis?According to researchers Tom Cooley and Chester Spatt, US policy makers were prompt in their recent re-sponses to the crisis. But as Professor Spatt pointed out, creditors were not provided with adequate information about how the proposals would actually work. Jes Staley echoed this sentiment when he commented that “bad news is not the worst thing for the market to hear. No news is far worse”.

A question from the audience about rating agencies raised much debate, as was reported by several news-papers in the days following the event. Professor Spatt

explained that ratings came to be perceived almost as a kind of proxy for financial advice. “This is an odd model” commented Spatt, “because we turn to asset ma-nagers to deliver different perspectives on investment”.

Researchers Olivier Scaillet and newly appointed Amit Goyal cast a critical eye on delegated portfolio manage-ment. Their research highlighted issues with the cost and risk management practices of institutional fund ma-nagers and the ever-diminishing evidence that actively managed mutual funds beat the overall market.

1st European Conference of the SoFiEThe First European Society for Financial Econometrics (SoFiE) Conference was held June 10-12, 2009 in Ge-neva. The Swiss Finance Institute took on a leading role in the organization of this conference supported by the HEC, University of Geneva, FINRISK and the Geneva Fi-nancial Center Foundation. This conference provided a platform for discussions between over 100 international specialists, including among the invited speakers: a No-bel Prize laureate, Professors from Princeton, Stanford, New York University, and Oxford to name a few.

Industry Seminars In 2008 three presenters talked on the 7am industry seminars – held at the ZKB Zurich.

• HyunSongShinstartedwiththefirstseminaronAugust 8 and talked on procyclical leverage. He is a Princeton University Professor and Consultant for G20.

• MichaelBrennantalkedonOctober7onthemispri-cing return premium. He is a Professor at the Univer-sity of California in Los Angeles and at the London Business School.

• ThomasJordan’spresentationincludedadescriptionof the National Bank’s response to the financial crisis. He is a member of the Governing Board of the Swiss National Bank and he also teaches at the University of Bern. The registrations for this event on October 28, 2008 were outstanding and the seminar had to be held in the entrance hall of the ZKB.

From left: Tom Cooley, Della Bradshaw, Benoit Dumont, Patrick Odier and Chester Spatt

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Foundation Board

Managing DirectorProf. Jean-Pierre Danthine

PhD ProgramWorking Group

Prof. Erwan Morellec

Executive EducationAdvisory Board

COODr. Harry Hürzeler

Knowledge TransferWorking GroupDr. Paolo Vanini

Director of ExecutiveEducation

Dr. Harry Hürzeler

Scientific Council

Secretary GeneralAnita Belitz-Krasniqi

Director of ResearchProf. Rajna Gibson

DirectorSFI - Léman

Prof. Bernard Dumas

DirectorSFI - Lugano

Prof. Giovanni Barone-Adesi

DirectorSFI - Zürich

Prof. Felix Kübler

FinRisk ScientificCouncil

SNFReview Panel

Structure and Overseeing Bodies

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Governing Bodies

The main governing body of the Swiss Finance Institute is the Foundation Board. It includes representatives of its founding members as well as representatives of its academic regional centers. The Foundation Board is advised by the Scientific Council on matters of scientific content and by the Executive Education Advisory Board on matters of Executive Education.

Foundation BoardThe Foundation Board members represent the entire finance and banking community in Switzerland, both locally and internationally. The Swiss Finance Institute gratefully acknowledges the participation of a number of members leaving the Foundation Board in 2008 and 2009: Dr. Marcel Rohner of UBS, Dr. Ulrich Körner of Credit Suisse, and Prof. Dr. Hans Weder of the University of Zurich as representative of SFI-Zurich Center.

ChairMr. Olivier Steimer Chairman of the Board of DirectorsBanque Cantonale Vaudoise, Lausanne

Deputy chairsMr. Hans-Ulrich MeisterCEO Credit Suisse Switzerland, Zurich

Dr. Francesco Morra CEO Switzerland, Wealth Management & Swiss Bank, UBS AG, Zurich

MembersMr. Raymond J. BaerChairman of the Board of Directors, Julius Baer, Zurich - as representative of the Association of Swiss Commercial and Investment Banks in Switzerland

Prof. Dr. Andreas FischerRector, University of Zurich, representing theSwiss Finance Institute Zurich Center

Mr. Antonio FogliaChairman of the Executive Committee, Banca delCeresio, Lugano – as representative of the TicinoBankers Association

Prof. Dr. Peter GomezChairman of the Board of Directors, SIX Swiss Ex-change SA

Dr. Alfredo GysiCEO, BSI SA, Lugano – as representative of theAssociation of Foreign Banks in Switzerland

Dr. Philipp HalbherrHead Investment Banking and Member of the Execu-tive Committee, Cantonal Bank of Zurich

Prof. Dr. Piero MartinoliPresident, University of Lugano, representing theSwiss Finance Institute Lugano Center

Mr. Patrick OdierManaging Partner, Lombard Odier Darier Hentsch& Cie, Geneva - as representative of the Swiss Private Bankers Association

Dr. Urs P. RothCEO, Swiss Bankers Association

Prof. Dr. Jean-Dominique VassalliRector, University of Geneva, representing theSwiss Finance Institute Léman Center

Dr. Pierin VincenzCEO, Raiffeisen Group Switzerland

Swiss Finance Institute Foundation Board – June 2009

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Scientific Council The Swiss Finance Institute Scientific Council (SC) counts 5 international experts nominated as a result of a wide consultation with its university partners with the aim at arriving at a broad consensus on the represen-tation in the SC of the Swiss Finance Institute main fields of research: financial mathematics, financial eco-nometrics, investments, and corporate finance. The Foundation Board of the Swiss Finance Institute has committed to make decisions with scientific content exclusively under the recommendation of its Scientific Council. The Swiss Finance Institute is very fortunate to have been able to secure the enthusiastic support of 5 internationally renowned experts under the chair-manship of:

Prof. René StulzFisher College of Business, Ohio State University.

The other members of the Scientific Council are:

Prof. Tim BollerslevFuqua School of Business, Duke University

Prof. Patrick BoltonColumbia Business School, Columbia University

Prof. Michael BrennanAnderson School of Management, UCLA

Prof. Ioannis KaratzasDept of Mathematics, Columbia University

The cooperation agreement with the Swiss Finance Institute and the Swiss National Science Foundation indicates that the International Scientific Council of FINRISK is to act as the main supervisory body for all activities and funding falling under the heading of Project Research.

Executive Education Advisory BoardThe Executive Education Advisory Board is the main supervisory body concerned with Executive Education. The Executive Education Advisory Board ensures that the Executive Education offering of the Swiss Finance Institute is of the highest quality, addresses the needs of the industry and is well coordinated with other initiatives within Switzerland. The Swiss Finance Institute gratefully acknowledges the participation of Dr. Moehrle from Deutsche Bank AG who left the Executive Education Advisory Board this year.

The members of the Executive Education Advisory Board in June 2009 are:

ChairUrs Hofmann Chief Learning Officer, Head CS Business School,Credit Suisse

MembersProf. Dr. René CapitelliManaging Director, Head Business Support,UBS AG and University of Basel

Curdin DuschlettaManaging Director, UBS AG

Per EtholmManaging Director, Citigroup

Prof. Dr. Rudolf GrünigUniversity of Fribourg

Dr. Jürg GutzwilerCEO and Member of the Executive Board,RBA-Holding

Prof. Dr. Alfred MettlerGeorgia State University

Maxime MorandHead HR, Lombard Odier Darier Hentsch & Cie

Lukas StuckyHead Julius Baer Academy, Bank Julius Baer & Co. Ltd

Matthias Wirth *Swiss Bankers Association

* Executive Education Advisory Board Secretary

2008 Facts & Figures

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24

Summary of 2008 financial accounts

Balance sheet as of December 31, 2008

31.12.2008CHF

ASSETS

Current assetsCash and cash equivalents 15'515'199.41Accounts receivable 27'471.70Other receivables 210'620.53Prepaid expenses and accrued income 366'529.97

Total current assets 16'119'821.61

Fixed assetsInvestment portfolios 41'144'828.85Due from Securities Lending and Borrowing 17'207'657.00Deposits 55'807.25Office equipment 105'322.65IT equipment 83'631.65

Total fixed assets 58'597'247.40

TOTAL ASSETS 74'717'069.01

LIABILITIES AND FOUNDERS' EQUITY

Short-term liabilitiesAccounts payable 828'144.80Other payables 38'344.86Research accounts 756'415.11Accrued expenses and deferred income 1'840'407.05Long term loans founders 8'000'000.00

Total short-term liabilities 11'463'311.82

Founders' equityFoundation capital 15'000'000.00Reserves 30'064'785.00Retained earnings- As of January 1, 2008, from SFI donations and operations 28'781'426.58

28'781'426.58Net result from donations and operations -10'592'454.39

Total founders' equity 63'253'757.19

TOTAL LIABILITIES AND FOUNDERS' EQUITY 74'717'069.01

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Profit and loss statement for the period from January 1st to December 31, 2008

31.12.2008CHF

Income from Executive Education courses 5'159'726.45Expenses from Excutive Education courses -3'394'152.25

Net result from courses before general expenses 1'765'574.20

Expenses Research -2'759'603.20Expenses Ph D Program -855'181.90Income from Knowledge Transfer 112'241.25Expenses from Knowledge Transfer -125'798.05 -13'556.80Expenses Projects -500'000.00

Net operating result before general expenses -2'362'767.70

GENERAL EXPENSES

Personnel expenses -2'808'844.41Other operating costs -1'032'372.50

Net operating result -6'203'984.61

Net extraordinary income 3'556.69Donations 4'693'023.00

INCOME/EXPENSES ON INVESTMENTS

Total realized and unrealized gains on investments -8'774'201.66Administration and bank fees -310'847.81

Total income/expenses on investments -9'085'049.47

RESULT FROM DONATIONS AND OPERATIONS FOR YEAR 2008 -10'592.454.39

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2008 and Forthcoming Publications in Academic Journals and Books by SFI Researchers

Philippe BacchettaHigher Order Expectations in Asset Pricing, with E. van Wincoop, Journal of Money, Credit, and Ban-king, vol. 40, pp 837-866, 2008.

Predictability in Financial Markets: What Do Survey Expectations Tell Us?, with E. Mertens and E. van Wincoop, Journal of International Money and Finance, forthcoming.

Exchange Rate Volatility and Productivity Growth: The Role of Financial Development, with Ph. Aghion, R. Rancière and K. Rogoff, Journal of Monetary Econo-mics, forthcoming.

Giovanni Barone-AdesiBarrier Option Pricing Using Adjusted Transition Probabilities, with N. Fusari and J. Theal, Journal of Derivatives, vol.16 (2), pp 36-53, 2008. Book chapters.

The Design of New Security Mar-kets, Risk Management in Commodity Markets, Chapter 4, Wiley, forthcoming.

The World Oil Market, with C. Bärlocher, Encyclopedia of Quantitative Finance, Wiley, forthcoming.

Tony BerradaBounded Rationality and Asset Pri-cing with Intermediate Consumpti-on, Review of Finance, forthcoming.

Peter BossaertsEquilibrium Asset Pricing Under Heterogeneous Information, with B. Biais and Ch. Spatt, Review of Financial Studies, forthcoming.

Modeling Price Pressure in Finan-cial Markets, with E. Asparouhova, Journal of Economic Behavior and Organization, forthcoming.

From Market Jaws to the Newton Me-thod: The Geometry of How a Market Can Solve Systems of Equations, with Charles R. Plott, Handbook of Experimental Economics Results, Charles Plott and Vernon L. Smith, eds. 2008, Amsterdam: North-Holland.

Risk Aversion in Laboratory Asset Markets, with W. Zame, Risk Aver-sion in Experiments, Ed. J. Cox and G. Harrison, volume 12, 2008, Greenwich. CT: JAI Press, Research in Experimental Economics.

Promoting Intellectual Discovery: Patents vs. Markets, with J. Copic and D.Meloso, Science, forthcoming.

Contributions of Functional Neuroimaging, with J. O’Doherty, Current Directions in Psychological Science (Special Issue on The Interface Between Neuroscience and Psychological Science), vol. 17, 2008.

Human Insula Activation Reflects Risk Predictions Errors As Well As Risk, with K. Preuschoff and S. Quartz, Journal of Neuroscience, vol. 28, pp 2745-2752, 2008.

Markowitz in the Brain?, with K. Preuschoff and S. Quartz, Revue d’EconomiePolitique, pp 75-96, 2008.

Investigating Signal Integration with Canonical Correlation Analy-sis of fMRI Brain Activation Data, with A. Bruguier, K. Preuschoff and S. Quartz, NeuroImage, vol. 41, pp 35-44, 2008.

Neural Correlates of Mentalizing-Related Computations During Strategic Interactions in Humans, with A. Hampton and J. O’Doherty, Proceedings of the National Academy of Sciences, vol. 105, pp 6741-6746, 2008.

The Neurobiological Foundations of Valuation in Human Decision Making under Uncertainty, with M. Hsu and K. Preuschoff, Neuroeconomics: Decision Making and the Brain, Ed. P.W. Glimcher, C.F. Camerer, E. Fehr, R.A. Poldrack, New York: Academic Press, forthcoming.

Neurobiological Studies of Risk Assessment: A Comparison of Ex-pected Utility and Mean-Variance Approaches, with M. d’Acremont, Journal of Cognitive, Affective and Behavioral Neuroscience, vol. 8(4), pp 363-374, 2008.

Neural Coding of Outcome Uncertainty, with W. Schultz, K. Preuschoff, C. Camerer, M. Hsu, C.D. Fiorillo, and P. Tobler, Philoso-phical Transactions of the Royal Society B: Biological Sciences, 2008.

Predicting Risk in a Multiple Simu-lus - Multiple Reward Environment, with M. d‘Acremont and M. Gilli, Reward And Decision Making, ed. J.C. Dreher and L. Tremblay, Elsevier, forthcoming.

Marc ChesneyStock Options and Manager’s Incentives to cheat, with R. Gibson, The Review of Derivatives Research, vol. 11, 2008.

Mathematical Methods for Financial Markets, with M. Jeanblanc and M. Yor, Springer Verlag, forthcoming.

Jean-Pierre DanthineDistribution Risk and Equity Returns, with J.B. Donaldson and P. Siconolfi, in The Handbook of the Equity Risk Premium, R. Mehra, ed., 2008, North Holland Handbooks of Finance Series, Elsevier, Amsterdam.

Enrico De GiorgiThe -Beauty Contest: Choosing

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Numbers, Thinking Intervals, with S. Reimann, Games and Economic Behavior, vol. 64(2), pp 470-486, 2008.

Paul EmbrechtsAggregating operational risk across matrix structured loss data, with G. Puccetti, Journal of Operational Risk 3(2), 29-44, 2008.

EVT-based estimation of risk capital and convergence of high quantiles, with M. Degen, Advances in Applied Probability, 40(3), 696-715, 2008.

Additivity properties for Value-at-Risk under Archimedean de-pendence and heavy-tailedness, with J. Neslehova and M.V. Wüth-rich, Insurance: Mathematics and Economics, forthcoming.

Panjer recursion versus FFT for compound distributions, with M. Frei, Mathematical Methods inOperations Research, forthcoming.

Multivariate extremes and the aggregation of dependent risks: examples and counter-examples, with D.D. Lambrigger and M.V. Wüthrich, Extremes, forthcoming.

Revisiting the edge, ten years on, with V. Chavez-Demoulin, Com-munications in Statistics: Theory and Methods, forthcoming.

Copulas: A personal view, Journal of Risk and Insurance, forthcoming.

Operational Risk: the Advanced Measurement Approach, with V. Chavez-Demoulin, Encyclopedia of Quantitative Finance, John Wiley, 2008.

Copulas and dependence concepts in insurance, with V. Chavez-De-moulin, Encyclopedia of Quantitative Finance, John Wiley, 2008.

Linear correlation and EVT: properties and caveats, Journal of Financial Econometrics, forthcoming.

Quantitative Risk Management: Concepts, Techniques, Tools, with A. J. McNeil and R. Frey, Japanese

translation published by arrange-ment with Princeton University Press, 2008.

Giovanni FavaraReconsidering the Role of Money for Output, Prices and Interest Rates, Journal of Monetary Economics, forthcoming.

Rajna Gibson BrandonFinancial Integration, Economic Instability and Trade Structure in Emerging Markets, with A. Chambet, Journal of International Money & Finance, vol. 27(4), pp 654-675, 2008.

Stock Options and Managers In-centives to Cheat, with M. Chesney, The Review of Derivatives Research, vol. 11, 2008.

Manfred GilliUsing economic and financial information for stock selection, with I. Roko, Computational Management Science, vol. 5, pp 317–335, 2008.

An efficient branch-and-bound strategy for subset vector autore-gressive model selection, C. Gatu, E.J. Kontoghiorghes and P. Winker, Journal of Economic Dynamics and Control, vol. 32(6), pp 1949–1963, 2008.

Amit GoyalHow Common are Common Re-turn Factors Across Nyse and Nas-daq?, with Ch. Pérignon and Ch. Villa, Journal of Financial Economics, vol. 90(3), pp 252-271, 2008.

The Selection and Termination of Investment Managers by Plan Sponsors, with S. Wahal, August 2008, Journal of Finance, vol. 63(4), pp 1805-1847, 2008.

A Comprehensive Look at the Empirical Performance of Equity Premium Prediction, with I. Welch, Review of Financial Studies, vol. 21(4), pp 1455-1508, 2008.

Cross-Section of Option Returns and Volatility, with A. Saretto, Journal of Financial Economics, forthcoming.

Liquidity and the Post-Earnings-Announcement-Drift, with T. Chordia, G. Sadka, R. Sadka and L. Shivakumar, Financial Analyst Journal, forthcoming.

Thorsten HensGlobally Evolutionary Stable Portfolio Rules, with I. Evstigneev and K.R. Schenk-Hoppé, Journal of Economic Theory, vol. 140, pp 197-228, 2008.

Dynamic General Equilibrium and T-Period Fund Separation, with A. Gerber and P. Woehrmann, Journal of Financial and Quantitative Finance, forthcoming.

Behavioural Finance for Private Banking, with K. Bachmann, Wiley & Sons, 2008.

Martin HoesliConstant-quality house price indexes for Switzerland, with S.C. Bourassa, D. Scognamiglio and P. Sormani, Swiss Journal of Economics and Statistics, vol. 144(4), pp 561-575, 2008.

A comparative analysis of house prices and bubbles in the U.K. and New Zealand, P. Fraser and L. McAlevey, Pacific Rim Property Research Journal, vol. 14(3), pp 257-278, 2008.

House prices and bubbles in New Zealand, with P. Fraser and L. McA-levey, Journal of Real Estate Finance and Economics, vol. 37(1), pp 71-91, 2008.

Real estate portfolio strategy and product innovation in Europe, with J. Lekander, Journal of Property Investment and Finance, vol. 26(2), pp 162-176, 2008.

The inflation hedging characteri-stics of U.S. and U.K. investments: A multi-factor error correction approach, with C. Lizieri, B. Mac-Gregor, Journal of Real Estate Finance and Economics, vol. 36(2), pp 183-206, 2008.

Investissement immobilier – Prise de décision et gestion du risque, 2008, Economica (Paris).

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Julien HugonnierMutual fund portfolio choice in the presence of dynamic flows, with R. Kaniel, Mathematical Finance, forthcoming.

Jean ImbsFinance, Institutions and Risk Sharing in International Portfolios, with M. Fratzscher, Journal of Finan-cial Economics, forthcoming.

The Dynamics of Trade and Competition, with N. Chen and A. Scott, Journal of International Econo-mics, forthcoming.

Eric JondeauThe Impact of Shocks on High-er Moments, with M. Rockinger, Journal of Financial Econometrics, forthcoming.

Optimal Monetary Policy in an Es-timated DSGE Model of the Euro Area with Cross-countryHeterogeneity, with J.-G. Sahuc, International Journal of Central Ban-king, vol. 4, pp 23-72, 2008.

Testing Heterogeneity within the Euro Area Using a Structural Multi-Country Model, with J.- G. Sahuc, Economics Letters, vol. 99, pp 192-196, 2008.

Examining Bias in Estimators of Li-near Rational Expectations Models under Misspecification, with H. Le Bihan, Journal of Econometrics, vol. 143, pp 375-395, 2008.

Felix KüblerComputational Aspects of General Equilibrium Theory, with D.J. Brown, 2008, Springer-Verlag.

Henri LoubergéInsuring a risky investment project, with R. Watt, Insurance Mathematics and Economics, vol. 42 (1), pp 301-310, 2008.

Hybrid cat bonds, with P. Barrieu, Journal of Risk and Insurance, forthcoming.

Semyon MalamudLong Run Forward Rates and Long Yields of Bonds and Options in Heterogeneous Equilibria, Finance

and Stochastics, vol. 12(2), pp 245-264, 2008.

Universal Bounds for Asset Prices in Heterogeneous Economies, Finance and Stochastics, vol. 12(3), pp 411-422, 2008.

Market Consistent Pricing of Insu-rance Products, with E. Trubowitz and M. Wüthrich, Astin Bulletin, vol. 38(2), pp 483-526, 2008.

Erwan MorellecClosed-form solutions to stocha-stic switching problems, with P. François, Journal of Mathematical Economics, vol. 44, 2008.

Dynamic investment and financing under personal taxation, with N. Schuerhoff, Review of Financial Studies, forthcoming.

Eric NowakParent Company Control and Mar-ket Risk Uncoupling Effect – An empirical analysis of beta factors in factual and contractual groups of companies, with C. Brüchle and O. Ehrhardt, Journal of Business Econo-mics, vol. 78(5), pp 455-476, 2008.

Foreign vs. domestic listing: an entrepreneurial decision, with Y. Ding, and H. Zhang, Journal of Business Venturing, 2008.

Eigentum und Kontrolle in deutschen Mehrgenerationen-Familienunternehmen, Die Zukunft der Finanzdienstleistungsindustrie in Deutschland - Tagungsband zur Jubi-läumskonferenz der Frankfurt School of Finance & Management, with F.M. Weber, 2008, ed. Klaus-Peter Mül-ler and Udo Steffens, pp 121-138, Frankfurt School Verlag.

Marc PaolellaAn Econometric Analysis of Emis-sion Trading Allowances, with L. Taschini, Journal of Banking and Fi-nance, vol. 32, pp 2022–2032, 2008.

Risk Prediction: A DWARF-like Approach, with S.-C. Steude, The Journal of Risk Model Validation, vol. 2(1), pp 25-43, 2008.

Uniform Saddlepoint Approxi-

mations for Ratios of Quadratic Forms, R. Butler, Bernoulli, vol. 14(1), pp 140-154, 2008.

Evaluating the Density of Ratios of Noncentral Quadratic Forms in Normal Variables, with S. Broda, Computational Statistics and Data Analysis, forthcoming.

Asymmetric Multivariate Normal Mixture GARCH, with M. Haas and S. Mittnik, Computational Statistics and Data Analysis, forthcoming.

Assessing and Improving the Per-formance of Nearly Efficient Unit Root Tests in Small Samples, with S. Broda and K. Carstensen, Econo-metric Reviews, forthcoming.

Michael RockingerPredicting Tail-related Risk Mea-sures: The Consequences of using GARCH Filters for Non GARCH Data, with Amine Jalal, Journal of Empirical Finance, vol. 15, pp 868–877, 2008.

Olivier ScailletLocal transformation kernel densi-ty estimation of loss distributions, with J. Gustafsson, M. Hagmann, and J. P. Nielsen, Journal of Business and Economic Statistics, forthcoming.

Testing for stochastic dominance efficiency, with N. Topaloglou, Journal of Business and Economic Statistics, forthcoming.

Testing for equality betwen two co-pulas, with B. Rémillard, Journal of Multivariate Analysis, forthcoming.

Assessing multivariate predictors of financial market movements: A latent factor framework for ordinal data, with P. Huber and M.-P. Victoria-Feser, Annals of Applied Statistics, forthcoming.

Testing for threshold effect in ARFIMA models: Application to US unemeployment rate data, with A. Lahiani, International Journal of Forecasting, forthcoming.

Business and financial Indicators: what are the determinants of default probability changes?, in

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Credit Risk : Models, Derivatives, and Management, with F. Couderc and O. Renault, pp 235-268, Chapman & Hall, Financial Mathematics Series, 2008.

Swap market models, with S. Galluccio, Encyclopedia of Quantita-tive Finance, John Wiley & Sons Ltd, forthcoming.

CMS spread options, with S. Galluc-cio, Encyclopedia of Quantitative Finance, John Wiley & Sons Ltd, forthcoming.

A primer on weather derivatives, with P. Barrieu, Handbook on Uncertainty and Environmental Decision Making, International Series in Operations Research and Ma-nagement Science, Springer Verlag, forthcoming.

Norman SchürhoffDynamic investment and financing under personal taxation, with E. Morellec, Review of Financial Studies, forthcoming.

Martin SchweizerExponential Utility Indifference Valuation in Two Brownian Settings with Stochastic Correlation, with C. Frei, Advances in Applied Probability, vol. 40, pp 401-423, 2008.

Term Structures of Implied Vola-tilities: Absence of Arbitrage and Existence Results, with J. Wissel, Mathematical Finance, vol.18, pp 77-114, 2008.

Arbitrage-Free Market Models for Option Prices: The Multi-Strike Case, with J. Wissel, Finance and Stochastics, vol. 12, pp 469-505, 2008.

Local Risk-Minimization for Mul-tidimensional Assets and Payment Streams, Banach Center Publications,

vol. 83, pp 213-229, 2008.

Didier SornetteAnalysis of the real estate market in Las Vegas: Bubble, seasonal pat-terns, and prediction of the CSW indexes, with W.-X. Zhou, Physica A, vol. 387, pp 243-260, 2008.

Quantitative determination of the level of cooperation in the presence of punishment in three public good experiments, with D. Darcet, Journal of Economic Inter-action and Coordination, vol. 3, pp 137-163, 2008.

Nurturing Breakthroughs: Lessons from Complexity Theory, Journal of Economic Interaction and Coordinati-on, vol. 3, pp 165-181, 2008.

Interdisciplinarity in Socio-econo-mics, Mathematical Analysis and Predictability of Complex Systems, Socio-Economic Review, vol. 6, pp 27-38, 2008.

Robust dynamic classes revealed by measuring the response function of a social system, with R. Crane, Proc. Nat. Acad. Sci. USA, vol. 105(41), pp 15649-15653, 2008.

Quantum decision theory as quan-tum theory of measurement, with V.I. Yukalov, Physics Letters A, vol. 372, pp 6867-6871, 2008.

Empirical Tests of Zipf‘s law Mechanism In Open Source Linux Distribution, with T. Maillart, S. Spaeth and G. von Krogh, Physical Review Letters, vol. 101, pp 218701, 2008.

Market Bubbles and Crashes, with T. Kaizoji, the Encyclopedia of Quantitative Finance, Wiley, forthcoming.

Theory of Zipf‘s Law and of

General Power Law Distributions with Gibrat‘s law of Proportional Growth, in Lecture Notes in Economics and Mathematical Systems, with A. Saichev and Y. Malevergne, Springer, 2008.

Pascal St-AmourAsymmetric Information and Ad-verse Selection in Mauritian Slave Auctions, with D. Georges and D. Vencatachellum, Review of Economic Studies, forthcoming.

Alexander WagnerOrdinary economic voting beha-vior in the extraordinary election of Adolf Hitler, with G. King, O. Rosen, and M. Tanner, Journal of Economic History, vol. 68(4), pp 951-996, 2008.

Mei WangEvaluating Lotteries, Risks, and Riskmitigation Programs, with P.S. Fischbeck, Journal of Risk Research, vol. 11(6), pp 775-795, 2008.

Prospect Theory for Continuous Distribution, with M. O. Rieger, Journal of Risk and Uncertainty, vol. 36(1), pp 83-102, 2008.

Are Pension Fund Managers Over-confident, with G. Gort, M. Siegrist, Journal of Behavioral Finance, vol. 9(3), pp 163-170, 2008.

What is behind Priority Heuristic? A Mathematical Analysis, with M. O. Rieger, Psychological Review, vol. 115(1), pp 274-280, 2008.

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Swiss Finance Institute Research Paper Series

The aim of the Swiss Finance Institute Research Paper Series is to disseminate original theoretical or empirical research with relevance to banking and finance. The series in-cludes research contributions carried out at the Swiss Finance Institute and its research partner, the National Centre of Competence in Research “Financial Valuation and Risk Management” (NCCR FinRisk), by faculty, PhD students and affiliated researchers. Papers issued in 2007 were included on the Social Science Research Network Financial Economics Network. To access the Swiss Finance Institute Research Paper Series, please use the following link: www.ssrn.com/link/swiss-finance-institute.html

Swiss Finance Institute Research Paper Series 2008

N°49Incomplete-Market Equilibria Sol-ved Recursively on an Event TreeBernard DUMAS, University of Lausanne, Swiss Finance Institute, NBER and CEPRAndrew LYASOFF, Boston University

N°48Sacred values in financial economic decision-making: Experimental evidenceRajna GIBSON, University of Gene-va and Swiss Finance InstituteCarmen TANNER, University of ZurichAlexander F. WAGNER, Univer-sity of Zurich and Swiss Finance Institute

N°47What do frictions mean for Q-theory testing?Maria Cecilia BUSTAMANTE, University of Lausanne and Swiss Finance Institute

N°46The Dynamics of Going PublicMaria Cecilia BUSTAMANTE, University of Lausanne and Swiss Finance Institute

N°45Assessing multivariate predictors of financial market movements: A latent factor framework for ordinal dataPhilippe HUBER, University of Geneva

Olivier SCAILLET, University of Geneva, HEC and Swiss Finance InstituteMaria-Pia VICTORIA-FESER, Uni-versity of Geneva

N°44Frailty Correlated DefaultDarrell DUFFIE, Stanford UniversityAndreas ECKNER, Stanford UniversityGuillaume HOREL, Stanford UniversityLeandro SAITA, Lehman Brothers

N°43The Price of Protection: Deriva-tives, Default Risk, and MarginingRajna GIBSON, University of Geneva and Swiss Finance InstituteCarsten MURAWSKI, The Universi-ty of Melbourne

N°42Testing for threshold effect in ARFIMA models: Application to US unemployment rate dataAmine LAHIANI, ESC-Rennes School of Business and EconomiX, University of Paris 10 NanterreOlivier SCAILLET, Université de Genève HEC and Swiss Finance Institute

N°41Strategies of Survival in Dynamic Asset Market GamesRabah AMIR, University of ArizonaIgor V. EVSTIGNEEV, University of ManchesterLe XU, University of Manchester

N°40Asymmetric Information and Ad-verse Selection in Mauritian Slave AuctionsGeorges DIONNE, HEC Montreal, CIRPEE and CIRRELTPascal ST-AMOUR, University of Lausanne, Swiss Finance Institute, CIRANO and CIRPEEDesire VENCATACHELLUM, Afri-can Development Bank

N°39Global Securitized Real Estate Benchmarks and PerformanceCamilo SERRANO, University of GenevaMartin HOESLI, University of Ge-neva (HEC and SFI), University of Aberdeen and Bordeaux Ecole de Management

N°38Auctioned IPOs: The U.S. EvidenceFrançois DEGEORGE, Universi-ty of Lugano and Swiss Finance InstituteFrançois DERRIEN, HEC ParisKent L. WOMACK, Tuck School of Business, Dartmouth College

N°37Hedge fund alphas: do they reflect managerial skills or mere compen-sation for liquidity risk bearing?Rajna GIBSON, University of Gene-va and Swiss Finance InstituteSongtao WANG, University of Zu-rich (PhD Candidate in Finance) and Swiss Finance Institute

N°36Learning about Beta: Time-Varying

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Factor Loadings, Expected Returns, and the Conditional CAPMFrancesco FRANZONI, University of Lugano and Swiss Finance InstituteTobias ADRIAN, Federal Reserve Bank of New York

N°35The Changing Nature of Market RiskFrancesco FRANZONI, Universi-ty of Lugano and Swiss Finance Institute

N°34Constructing Long/Short Portfo-lios with the Omega ratioManfred GILLI, University of Ge-neva and Swiss Finance InstituteEnrico SCHUMANN, University of GenevaGiacomo DI TOLLO, University of PescaraGerda CABEJ, University of Geneva

N°33Look-Ahead Benchmark Bias in Portfolio Performance EvaluationGilles DANIEL, ETH ZurichDidier SORNETTE, ETH Zurich and Swiss Finance InstitutePeter WOHRMANN, University of Zurich

N°32Bond Ladders and Optimal PortfoliosKenneth L. JUDD, Stanford UniversityFelix KUBLER, University of Zu-rich and Swiss Finance InstituteKarl SCHMEDDERS, University of Zurich

N°31Asset Market Games of SurvivalRabah AMIR, University of ArizonaIgor V. EVSTIGNEEV, University of ManchesterKlaus Reiner SCHENK-HOPPE, University of Leeds

N°30From Discrete to Continuous Time Evolutionary Finance ModelsJan PALCZEWSKI, University of Leeds and University of WarsawKlaus Reiner SCHENK-HOPPE, University of Leeds

N°29Market Selection of Constant Pro-portions Investment Strategies in Continuous TimeJan PALCZEWSKI, University of Leeds and University of WarsawKlaus Reiner SCHENK-HOPPE, University of Leeds

N°28Bubbles and multiplicity of equili-bria under portfolio constraintsJulien HUGONNIER, University of Lausanne and Swiss Finance Institute

N°27Are Securitized Real Estate Re-turns more Predictable than Stock Returns?Martin HOESLI, University of Geneva (HEC and Swiss Finance Institute), University of Aberdeen (Business School), Bordeaux Ecole de ManagementCamilo SERRANO, University of Geneva (HEC)

N°26Mutual Fund Competition in the Presence of Dynamic FlowsMichèle BRETON, CREF, GERAD and HEC MontréalJulien HUGONNIER, University of Lausanne and Swiss Finance InstituteTarek MASMOUDI, Caisse de dépôt et placement du Québec (CDPQ)

N°25Mathematical basis of quantum decision theoryVyacheslav I. YUKALOV, ETH Zü-rich and Bogolubov Laboratory of Theoretical Physics, Joint Institute for Nuclear ResearchDidier SORNETTE, ETH Zürich and Swiss Finance Institute

N°24Repo Markets, Counterparty Risk, and the 2007/2008 Liquidity CrisisChristian EWERHART, University of Zurich and NCCR FinriskJens TAPKING, European Central Bank

N°23Incomplete Information, Idiosyn-cratic Volatility and Stock Returns

Tony BERRADA, University of Ge-neva and Swiss Finance InstituteJulien HUGONNIER, University of Lausanne and Swiss Finance Institute

N°22Underinvestment Vs. Overinvest-ment: Evidence From Price Reac-tions To Pension ContributionsFrancesco FRANZONI, Universi-ty of Lugano and Swiss Finance Institute

N°21Determinants of the Block Pre-mium and of Private Benefits of ControlRui ALBUQUERQUE, Boston University, CEPR and ECGIEnrique SCHROTH, University of Lausanne and Swiss Finance Institute

N°20Valuing modularity as a real optionAndrea GAMBA, Departement of Economics, University of VeronaNicola FUSARI, University of Luga-no and Swiss Finance Institute

N°19Ambiguity Aversion and the Term Structure of Interest RatesPatrick GAGLIARDINI, Univer-sity of Lugano and Swiss Finance InstitutePaolo PORCHIA,Swiss Institute for Banking and Finance, University of St. GallenFabio TROJANI, Swiss Institute for Banking and Finance, University of St. Gallen

N°18False Discoveries in Mutual Fund Performance: Measuring Luck in Estimated AlphasLaurent BARRAS, Swiss Finance Institute and Imperial College, Tanaka Business SchoolOlivier SCAILLET, University of Geneva, HEC and Swiss Finance InstituteRuss WERMERS, University of Maryland, Robert H. Smith School of Business

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N°17Distributed Optimisation of a Portfolio‘s Omega Manfred GILLI, Department of Econometrics, University of Gene-va and Swiss Finance InstituteEnrico SCHUMANN, Department of Econometrics, University of Geneva

N°16Endogenous versus exogenous origins of financial rallies and cra-shes in an agent-based model with Bayesian learning and imitationGeorges HARRAS, Department of Management, Technology and Economics, ETH ZurichDidier SORNETTE, Department of Management, Technology and Economics, ETH Zurich and Swiss Finance Institute

N°15Anomalous Returns in a Neural Network Equity-Ranking PredictorJeffrey SATINOVER, Laboratoire de Physique de la Matière Conden-sée, CNRS UMR6622 and Universi-té des SciencesDidier SORNETTE, Department of Management, Technology and Economics, ETH Zurich and Swiss Finance Institute

N°14Evolutionary FinanceIgor V. EVSTIGNEEV, Economic Studies, University of ManchesterThorsten HENS, Swiss Banking Institute, University of ZurichKlaus REINER SCHENK-HOPPE, Leeds University Business School and School of Mathematics, University of Leeds

N°13Executive Compensation and Stock Options: An Inconvenient TruthJean-Pierre DANTHINE, Swiss Finance Institute, University of Lausanne and CEPRJohn B. DONALDSON, Columbia University

N°12A review of heuristic optimization methods in econometricsManfred GILLI, University of Ge-

neva and Swiss Finance InstitutePeter WINKER, University of Giessen

N°11The executive turnover risk premiumFlorian S. PETERS, University of Zurich and University of California at BerkeleyAlexander F. WAGNER, University of Zurich, Swiss Finance Institute and Harvard University

N°10Constant-Quality House Price In-dexes for SwitzerlandSteven C. BOURASSA, University of Louisville, CEREBEM, BEM Ma-nagement SchoolMartin HOESLI, University of Ge-neva, University of Aberdeen, CE-REBEM, BEM Management School and Swiss Finance InstituteDonato SCOGNAMIGLIO, AZI / CIFIPhilippe SORMANI, IAZI / CIFI

N°9Cash Sub-additive Risk Measures and Interest Rate AmbiguityNicole EL KAROUI, Ecole Polytech-niqueClaudia RAVANELLI, University of Zurich

N°8CHICAGO: A Fast and Accurate Method for Portfolio Risk CalculationSimon A. BRODA, University of Zurich, Swiss Banking InstituteMarc S. PAOLELLA, University of Zurich, Swiss Banking Institute

N°7Capital growth under transaction costs: An analysis based on the von Neumann-Gale modelWael BAHSOUN, University of ManchesterIgor V. EVSTIGNEEV, University of ManchesterMichael I. TAKSAR, University of Missouri

N°6Contemporaneous Aggregation of GARCH Models and Evaluation of the Aggregation Bias

Eric JONDEAU, University of Laus-anne and Swiss Finance Institute

N°5Technical Trading Revisited: Persi-stence Tests,Transaction Costs, and False DiscoveriesPierre BAJGROWICZ, University of GenevaOlivier SCAILLET, University of Geneva and Swiss Finance Institute

N°4Implied Volatility at ExpirationAlexey MEDVEDEV, PhD student, Swiss Finance Institute and Univer-sity of Geneva

N°3Nonparametric Instrumental Varia-ble Estimators of Quantile Structu-ral EffectsVictor CHERNOZHUKOV, Mas-sachusetts Institute of TechnologyPatrick GAGLIARDINI, Univer-sity of Lugano and Swiss Finance InstituteOlivier SCAILLET, University of Geneva and Swiss Finance Institute

N°2The Endogenous Price Dynamics of the Emission Allowances: An Application to CO2 Option PricingMarc CHESNEY, University of Zu-rich and Swiss Finance InstituteLuca TASCHINI, University of Zurich

N°1Predicting House Prices with Spatial Dependence: Impacts of Alternative Submarket DefinitionsSteven C. BOURASSA, University of Louisville, School of Urban and Public Affairs Eva CANTONI, University of Gene-va, Departement of Econometrics Martin HOESLI, University of Geneva, HEC and Swiss Finance Institute

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Overview of courses offered in 2008 by the Swiss Finance Institute

Programs in Bank Management

March 3 – 14, 2008• Master of Science in Wealth Management, Swiss Study Block

The Swiss Finance Institute delivers the Swiss Study Block for this program of the Singapore Management University and the Wealth Management Institute of Singapore. This part-time program develops high potential Private Banking advisors and Asset Managers particularly for the Asian region.

February 2008 – December 2008• Executive Program in Bank Management

The Executive Program combines solid knowledge and skills in management with practical know-how and insight into the functioning of the financial sector. The 7-week course is spread over 16 months. This course is held predominantly in German.

February 2008 - November 2008• Advanced Executive Program

The Advanced Executive Program helps senior executives from financial and related sectors to strengthen their management competences, to broaden their factual knowledge and to promote integrated thinking with respect to the current dramatic trends in the financial sector. The course comprises 10 modules, each lasting two and a half days. The course is held predominantly in German.

July 2008 - January 2009• Senior Management Program in Banking

The Senior Management Program (SMP) in Banking addresses the radical change in the international financi-al sector and provides senior executives from financial and related sectors with the opportunity to strengthen their management competences, to extend their knowledge and to promote integrated thinking with respect to current developments in the international financial sector. The course comprises 4 modules, which run between 4 and 6 days and take place in Geneva, Madrid, London, and Warsaw.

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Programs in Finance

July 21 – August 22, 2008 • Certificate in Financial Asset Management and Engineering (FAME)

This 4+1-week immersion program offers intensive training in state-of-the-art techniques and practices of asset management and financial engineering. Focusing on applications with a view to achieving in-depth understan-ding of modern finance, the program provides a certification that is unique for its breadth, compactness and intellectual stimulation.

Seminars in Private Banking

The following seminars last 5 days each and are aimed at Executives from clearly targeted segments. They are taught by a mixture of academics and senior practitioners.

• International Private Banking and Wealth Management Retreat Various academics and CEOs from Private Banking

• International Wealth and Tax Planning Various academics and experts from Wealth Planning

Seminars in Finance

Our Geneva Executive Courses in Finance offer one of the most extensive and thorough overviews of major developments in finance and bank management currently available. More than 20 different courses have been offered throughout the year 2008.

Risk Management, Derivatives and Trading

• Energy and Emission Trading Mark Holder, James Kharouf, Peter Fusaro

• Engineering Structured Products Salih Neftci

• Integrated Risk Management René Stulz

• Essentials of Options, Futures and other Derivatives Yacine Aït-Sahalia

• Credit Risk & Credit Derivatives: Latest Theories & Best Practices Didier Cossin

• Using & Managing Inflation Linked Instruments & their Derivatives David Cox

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Asset Management

• Private Equity Per Strömberg

• Real Estate Investment and Financing Jörg Baumberger, Philippe Sormani, Martin Hoesli, Olivier Scaillet

• Advanced Equity Portfolio Management I François-Serge Lhabitant

• Global Asset Allocation and Risk Budgeting Philippe Jorion

• Modern Fixed Income Markets: Relative Value, Arbitrage, Portfolio and Risk Management Stephen Schaefer

• Alternative Investments & Hedge Funds Thomas Schneeweis, Giovanni Beliossi

• Advanced Equity Portfolio Management II G. Andrew Karolyi

• Behavioral Finance and Investment Strategy Werner De Bondt

Financial Modelling and Quantitative Methods

• Financial Econometrics and Forecasting Francis X. Diebold

• Interest-Rate Models: Theory and Practical Applications Yacine Aït-Sahalia

• Practical Solutions for Econometric Issues in Asset Allocation Michael Brandt

• Advanced Mathematics of Derivatives and Credits Salih Neftci

• Exchange-Rate Economics and Forecasting Richard Levich

• Implementing Quantitative Techniques for Financial Markets David Cox

• Volatility and Correlation: Practical Methods for Financial Applications Tim Bollerslev

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The Swiss Finance Institute gratefully acknowledges the precious supportof its founding members:

Impressum

The Swiss Finance Institute Activity Report is published once a year. A publication of the Swiss Finance Institute.

Editor: Jean-Pierre Danthine.Contributors to this issue: Anita Belitz-Krasniqi, Theresia Büsser Stalder, Rebecca Frank.

The Activity Report can be obtained free of charge from:

Swiss Finance InstituteBd. du Pont d‘Arve 401211 Geneva 4 - SwitzerlandTel +41(0)22 379 84 71 - Fax +41(0)22 379 82 77www.SwissFinanceInstitute.ch - research@sfi.ch

Bd. du Pont d’Arve 401211 Geneva 4Switzerland

T +41 22 379 84 71 F +41 22 379 82 77 research@sfi.ch

www.SwissFinanceInstitute.ch

Act iv i ty Report2008-2009